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CBDT Clarification :6th CPC Tax due on 60% arrears FY 08-09

RAJAN GUPTA 
on 30 September 2008

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Dear Friends,

As I have already written a post about tax due on arrears from sixth pay commission .In that Post I have mentioned that as per section 192 of income tax act , tax is not deductible from the 60% of arrears which is to be paid in FY 2009-10 in Fy 2008-09.CBDT has come with a clarification on that and mention the same as I have told you earlier,but good point is here that they have come with a view that 60% of arrears is also not taxable in the year FY 2008-09 in the hands of employee. Though second view differs with my opinion given but I am totally satisfied with this as this is what we have demanded from govt in our earlier post ,But I would be more happy if this is come as a separate clarifications circular, presently this is given under regular TDS instruction circular heading given as

"SECTION 192 OF THE INCOME-TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2008-2009"

so represent more about TDS issue on salary not about tax due on salary .And In my view as far as Deduction of tds on 60% arrears is concerned , which is to be paid in 2009-10,section 192 og Income tax act is very much clear that tds is deductible at the time of "payment"so no clarification was required on that.

however second aspect of the clarification that 60 % of arrears is neither comes under the definition of "due" nor under "allowed" is more important which means its is not taxable in the hands of employees ...as the clarification is beneficial to the assesses/us so no more argument on wording of the clarification.Here is the clarification..

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CLARIFICATION REGARDING TDS OF ARREARS OF SALARY PAID TO GOVERNMENT SERVANTS ON ACCOUNT OF THE IMPLEMENTATION OF THE RECOMMENDATIONS OF SIXTH PAY COMMISSION


The Implementation Cell of the Department of Expenditure, Ministry of Finance vide its


Office Order F. No. 1/1/2008-IC dated 30th August, 2008 has stated at Para 2(v)



Bills may be drawn separately in respect of the arrears of pay and allowances for the period from January 1, 2006 to August 31, 2008. The aggregate arrears, computed after deduction of subscription at enhanced rates of GPF and NPS with reference to the revised pay, may be paid in two installments, the first installment being restricted to 40% of the aggregate arrears. DDOs/PAOs will ensure that action is taken simultaneously in regard to Government’s contribution towards enhanced subscription. Orders in regard to the payment of the second


installment of arrears will be issued separately



A number of representations have been received by CBDT seeking clarification as to whether TDS need to be deducted on 40% of arrear to be paid during 2008-09 or on the entire arrear payable to the government servant. The matter has been examined by the Board; the issue is clarified as given below.



Salary is as defined under Section 15 of Income Tax Act’61 :-


  1. any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not;
  2. any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him;
  3. any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.


2. It is clear from the Office Memorandum issued by the Department of Expenditure that 60% of the pay arrears neither fall in the category of due nor are allowed. Moreover, Section 192 of Income Tax Act’61, inter alia, requires any person responsible for paying any income chargeable under the head “Salaries” to deduct income tax on the amount payable at the stipulated rate at the time of payment.

Therefore it is clarified that income tax at source would be deducted u/s 192 only from the arrears of salary actually paid during FY 2008-09. On the balance, tax would be deducted during the financial year in which these pay arrears are actually paid.
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so enjoy the pay commission fully ,.,,please comment

full circular may be downloaded from the file section




Category Income Tax
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RAJAN GUPTA 

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